Volkswagen Mulls Closing German Car Factories for the First Time in Its 87-Year History

When I wrote my previous story about Volkswagen’s struggles a few days ago, I was accused of being a Volkswagen hater. Some people who love their Volkswagen cars thought it was unfair, as the carmaker has vastly improved its software, and there’s little to complain about its vehicles. While I’m glad that Volkswagen still has its devoted fans, the bigger picture shows that, for some reason, people don’t buy enough of its vehicles. This has put the company in a difficult situation, and its management is now forced to make painful decisions.

In a statement released on September 2, Volkswagen brand chief Thomas Schaefer noted that the situation is “extremely tense” and cannot be solved through “simple cost-cutting measures.” In December 2023, Volkswagen announced plans to cut costs by 10 billion euros ($11.14 billion) in a bid to reach a 6.5% margin by 2026, up from 2.4% currently. However, the carmaker is about 3 billion euros short of achieving this goal. More cuts are needed, and Shaefer can no longer rule out plant closures in Germany.

According to Automotive News, Volkswagen is considering closing one large vehicle plant and one component factory in Germany. The information has been confirmed by the automaker’s works council, which promised “fierce resistance” to the plans. The message has been supported by the IG Metall union, which called the plan “irresponsible” as it “shakes the foundations of Volkswagen and poses a massive threat to jobs and sites.”

If given the green light, these plant closures would be the first in Germany during Volkswagen’s 87-year history. However, this seems close to impossible, even in theory. Labor representatives hold half the seats on the company’s supervisory board. The German state of Lower Saxony, which owns a 20 percent stake in the automaker, often sides with trade union bodies. Fighting powerful unions would be an arduous task, and it represents the most important test of CEO Oliver Blume’s career.

Blume was named Volkswagen Group’s CEO after his predecessor, Herbert Diess, had also been revoked under intense pressure from the unions. The same unions have ended the careers of former CEO Bernd Pischetsrieder and ex-VW brand chief Wolfgang Bernhard. All three proposed unpopular measures to increase efficiencies at Volkswagen’s German operations. None of them stayed long enough at the helm to implement these unpopular measures. Would Oliver Blume prevail, or would this mark the end of his tenure? Time will tell.